Why Analysts Are Taking a Mixed Stance on Symantec After Earnings

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When Symantec Corp. (NASDAQ: SYMC) reported its most recent quarterly results late on Wednesday, the results were not close to what analysts expected and shares behaved accordingly. Even though earnings for this quarter were poor, analysts look rather mixed after Symantec’s report, although there were many price target changes.

24/7 Wall St. has included some brief very highlights from the earnings report, as well as what some analysts were saying after the release.

The company posted $0.28 in earnings per share (EPS) and $1.12 billion in revenue, compared with consensus estimates from Thomson Reuters that called for $0.38 in EPS and revenue of $1.27 billion. In the same period of last year, Symantec posted EPS of $0.29 and $884 million in revenue.

Merrill Lynch said that Symantec is seeing organic stabilization. However, the firm’s Underperform rating is based on the view that its stock continues to be overvalued. The firm noted:

Fourth quarter results did not change our thesis; we maintain our Underperform rating. Overall, it seems like execution is improving slightly, but stock valuation is stretched in light of fundamentals. SYMC believes exiting FY18 total organic revenues will grow in the mid-single digits, an optimistic assumption in our view.

BTIG has a Buy rating and maintained its $33 price target. Overall the firm believes that the Symantec story over the past 10 or so months has been a notable example of how a few key acquisitions can transform a business and shift the fickle opinion of the markets. An inline print this quarter was another key milestone. The firm commented:

Specifically, after four straight years of organic revenue declines in both the core enterprise and consumer security divisions, we’re finally on the cusp of growth. Fiscal 2018 will mark the year that Symantec metaphorically pours more fuel on the fire, and firmly accelerates into a new reality of revenue and profitability expansion.

Jefferies has a Hold rating and raised its price target to $29 from $28. In terms of the earnings results, the firm estimates that new business grew after numerous quarters of substantial declines. However, guidance was soft, with revenues below street estimates for both Enterprise and Consumer segments for the fiscal first-quarter and fiscal 2018.

JMP has a Market Outperform rating with a $35 price target. This firm actually took a fairly optimistic stance on the stock, saying in its report:

On the positive side, this management team has: 1) executed very well across fiscal 2017 under the leadership of CEO Greg Clark; 2) integrated the Symantec and Blue Coat businesses; 3) executed nicely on its goals around cost savings, synergies, and margin expansion, leading it to increase its FY18 non-GAAP EPS guidance; 4) made a smart move in acquiring LifeLock; and 5) remains poised to benefit from consolidation in the security space, in our opinion.

A few other analysts weighed in as well:

  • RBC raised its price target to $34 from $30.
  • Stifel raised its price target from $25 to $27.
  • Wunderlich raised its price target to $36 from $32.

Shares of Symantec were trading down over 5% to $31.36 on Thursday. The stock has a 52-week range of $16.25 to $33.22 and it has a consensus analyst price target of $30.17.